This week the House of Representatives will be voting on a major trade reform package. It is an attempt by the Democratic leadership to reverse the current decline in America's international competitiveness. k,2 Unfortunately, the policies of President Reagan have not resolved our trade problems, but exacerbated them. During this administration, our merchandise trade deficit has nearly quadrupled. The trade deficit is climbing still higher, and this year is expected to reach $170.9 billion. Meanwhile, the current account balance has abruptly reversed direction, from a surplus of $6 billion in 1981 to a record deficit of $110 billion last year.
U.S. businesses in nearly every manufacturing sector have lost market share at home, while their exports face market barriers and unfair trade practices abroad. America, once the preeminent player in world trade, is finding itself playing second or third string in every market.
Even our international financial position has deteriorated. In 1982, the United States was the world's largest creditor, with an external credit of $151 billion. By the end of 1985, we had become the world's largest debtor, with a net external debt of $101 billion. The present course must be corrected.
There are no precise measurements of what the long-term effects of these developments will be on our economy. Already we face an eroding industrial base and a crippled farm economy. U.S. productive capacity in our industrial and agricultural sectors is down significantly. Since 1981, 1.7 million manufacturing jobs have been lost, and half a million farms have been forced into foreclosure.
Much of our current position in international markets is related to macroeconomic policies that have led to excessive budget deficits, high interest rates and an overvalued dollar. Congress has clearly shown its commitment to reducing the deficit by enacting the Gramm-Rudman-Hollings bill. And recent efforts at international cooperation to lower the value of the dollar have been heartening. But much more remains to be done.
The Reagan administration has ignored the need to develop a clear, coherent national trade policy. It prefers instead to respond on an ad hoc, item-by-item basis. Whether the problem relates to automobile trade, textile trade, customs fraud, market access or exchange-rate policy, the administration has refused to act until pushed by outside forces -- usually Congress.
Perhaps the United States could get away with this reactive, halfhearted approach when the U.S. market was "safe" from foreign competition and we were the most significant player in international trade. Now we are merely one player in an ever-expanding field. We can't ad lib our way out of a $148 billion trade deficit.
The House Democrats' trade bill recognizes the realities of today's world markets, in which the principle of "comparative advantage" has been undermined by pervasive government subsidies and a proliferation of unfair trade practices. It attempts to discipline unfair play and move the international trading system toward more open markets for the benefit of all nations. It would provide the president with more effective tools to pursue a constructive trade policy. Numerous provisions would arm our trade negotiators with significant leverage to demonstrate the seriousness of our commitment to open markets and fair play.
The president, however, must do his part by sending forth tough negotiators with a strong mandate to use that leverage to the fullest extent. He must use the laws and remedies that are available to enforce U.S. rights and to challenge unfair foreign practices.
Finally, the president must formulate and pursue a consistent trade policy that both responds to current problems and prepares for a more competitive future. Trade-deficit reduction and market-opening measures are necessary short-term goals to turn around the trade imbalance. To compete more successfully in the long term, we must take additional steps to improve our productivity, educational skills and job training. The Democratic bill will ensure that America continues to compete in the world economy with the best and brightest people on Earth.
Tougher trade legislation is no substitute for a comprehensive trade policy. In fact, this trade bill would not have been necessary if the president had fully utilized the various tools that are already at his disposal. President Reagan has not only neglected to act -- he has refused to act. So it is up to Congress to demonstrate the leadership necessary to pull us out of this slump and help make America competitive again. By Richard A. Gephardt and Richard J.Pease; Richard A. Gephardt, a Democratic representative from Missouri, and Donald J. Pease, a Democratic representative from Ohio, are members of the Ways and Means Committee.